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Sunday, November 19, 2017

11 Ways Blacks And Latinos Can Close The Median Wealth Inequality

I read an alarming article about our country's racial wealth inequality yesterday at Fortune.com: Blacks and Latinos Will Be Broke in a Few Decades.  If the current trend of wealth separation between blacks, Latinos, and whites continues, by 2053 "black median families" will have ZERO wealth!  Latino "median families" will be right there with them 20 years later.  Remember from your statistic lessons that the median signifies those right in the middle of a distribution or range.

Image result for Racial median household wealth gap 2017

Currently, black median household wealth (total assets - total debt) is just $1,700.  Latinos are basically in the same boat, with $2000 in median household wealth.  Whites, in stark contrast, have a median household wealth today of $116,800.  These numbers are a national disappointment and the number one reason why the United States as a whole is in 21st place in the world in median household wealth at $55,876.  Unlike Fortune.com, or MSN.com, I can on this platform ask some actual meaningful questions like:

Why should whites care that the two biggest minority groups in this country should be that far back in median wealth and wealth accumulation?  Here are a couple reasons:

1.  The U.S. will be a majority minority nation according to projections by 2043.  Not closing the wealth gap could be disastrous for Gross Domestic Product (G.D.P.) growth.  Meaning our economy would cease to grow, our national debt would never be paid (we're in danger of this happening now), and our children and grandchildren would have no future or country to speak of.

2.  To avoid civil unrest and violence on a national scale.  We see pockets of civil unrest today related to racial injustice.  I'd hate to have my children and future grandchildren grow up in a place where racial disharmony is worse than it is today.  And if you haven't noticed, the sequence of Obama-Trump pretty much destroyed every gain we'd made since the Civil Rights movement.

If you've ever visited my About Me and scrolled half-way down the page, you probably noticed my educational agenda: "...I also believe financial literacy has the power to transform the lives of members of ethnic minorities (especially Latinos and blacks) who are economically challenged."  My mission is to help everyone, but I obviously have a vested interest and obligation to help people of color with my brand of financial literacy.  Why?

I'm a Mexican-American who's married to an African-American and has two mixed children.  This country has given me more wealth than I could've ever created for myself in Mexico.  Lastly, I've learned how to create wealth.  My household wealth is somewhere around $375K and growing thanks to appreciating real estate (and paying down 4 mortgages) and paper assets mostly.  So I'm going to now embark on providing solutions to this massive wealth inequality problem that center on self-reliance.  Some will be financial in nature while others will be cultural.  If you're a minority and don't agree with what I have to say...oh well.  I really don't care.  Start your own blog and write your version of the truth.  Alrighty then, let's turn this mutha out!

11 Ways blacks and Latinos can close the Median Wealth Gap

1. Stop expecting whites to change how things are today.  You may protest if you like, and continue to fight the good fight by all means, but don't expect or wait for policy changes from whites to get you out of poverty.  Take action today for your own financial well-being regardless of the current political environment.

2.  Stop obsessing about racism.  I spent all of my high school (and some college) years (read my book!) obsessing about whites and their racism.  It was stupid and a complete waste of my time.  Had I just focused on minding my success I would've become money conscious sooner.  Does racism exist? Yes, both overt and systemic.  But will it do you any good to spend thousands of calories thinking, stressing, etc. about it over the course of your lifetime?  Money is green, not racist.  Money buys space, peace, and lawyers.  Just ask O.J.  

3.  Embrace capitalism.  We do our kids such a disservice by making them think the pursuit of money and riches is evil.  We live in the U.S., a capitalistic nation for crying out loud.  Believe me, I used to have Che Guevara posters hanging on my dorm room walls at UCSB.  No way in hell will I ever indoctrinate my kids to think wealth is greed and greed is bad.  I'll be doing the opposite and so should all black and Latino families if we're ever to get out of this deep hole we're in.  Money consciousness is a good thing people!

4.  God will not drop off a pile of money at your doorstep.  Too many blacks and Latinos are indoctrinated by the Christian and Catholic church to put their faith and trust in God.  "God will provide this, and God will provide that."  No God won't!  Blasphemy?  God helps those who help THEMSELVES!

5.  Cultural identity, both a blessing and a curse.  What does being black mean?  What does being Mexican or for that matter, Latino mean?  It means pride, heritage, and belonging.  Those are the positives.  But many times our cultural identities keep us from broadening our world views, our perspectives, from learning from each other or from whites even.

6.  We have to break the "we are victims" mindset once and for all.  Yes, the past happened.  Yes, the present isn't rosy, but I'll be damned if I ever let my daughter and son constantly express any minority victim mindset words.  We "push through" damn it!  See any victims in the video below?  Thank-you, Jasmyn Wright, M.Ed. for your excellent success mindset education.

7.  Stop overestimating public schools.  Mexican parents drop their kids off at school with all the trust in the world that the school will prepare their child for success in life.  The same can be said for many black families.  Great schools are the exception people!  Certainly not the norm.  This means you have to provide additional curriculum for your child at home.  The default end to the learning day for minority families is the answer to this question: "Did you finish your homework?"  So f'in what if your child finished his/her homework?  That doesn't mean they get the next two hours to be bullshitting on their smart phone or game system.  Don't you get it?  We're behind people.  Behind!  This means we need to have our kids double their learning.  Two additional hours after school (reading, on Ed apps, building things with their hands, etc.) after they've completed their homework, plus doing something educational during the winter and summer breaks should just about put us on par with whites.

8.  Stop living above your means.  Mexicans love their expensive trucks, and throwing their life savings into their daughter's Quinceanera, baptismal parties, etc....everything is cause for celebration in our community.  Blacks most definitely throw money away too in their own ways.  We need to develop a culture of saving!  It's bad enough we get paid less than our white counterparts in many instances.  We don't need to compound matters by living above our means.  How can you ever enter into the realm of investing, the key to wealth building, without having savings to invest?

9.  Learn to invest!  There is absolutely no excuse these days not to know how to invest in the most accessible wealth creation vehicle man has ever known: the stock and bond markets.  You know, there's this thing called the Internet, where you can go to a "search engine" thing-a-ma-bopper called, Google, and ask it questions.  Stop being lazy, people.  Stop being ignorant of these things.  Your conspiracy theories about the market being rigged, or it being for whites only, are no longer a good excuse!  Let me let you in on a secret: It was never a good excuse.  It was just your victim mindset in operation.  If I can invest in the market and have made a profit every year since 2007, so can you.

10.  Set goals and let one of them be to buy at least one real estate property in your lifetime.  Real estate is about having a stake, not necessarily about wealth.  When you own land and property, you are catapulted from indentured servant to landlord.  It's even better if you own a rental property.  Now you can take advantage of the current tax system and itemize, saving on your taxes.  Whites aren't wealthy simply because they make more money than other ethnic groups; they're wealthier because they save a shit load on taxes and they do so with purpose.

11.  Learn the principles of success.  Shameless plug here: Buy your Tweens and teens my book (see the left sidebar).  I explicitly share how minority youth can be successful in life.  4, 5-star reviews so far.  At least take a look!  It won't kill you to browse the Amazon page and read some of the reviews.  Having a success mindset with strategic skills to get through challenges in life is key to building wealth.

Look, I realize that privilege exists.  Many whites start out in life yards ahead in the race of life.  One can't deny this (see video below).  But that doesn't mean we, blacks and Latinos, should give up.  That we sit back and don't even take part in the race.  We can narrow those yards of separation by doing the things I've mentioned above.  And then when the race gets underway, we'll be in a better position to win that $100.  Mad love and respect to the minority students who ran the race from way back and still competed, beating many people.  There were some as you can see who didn't even run.  So last words: Never, ever, ever, ever, ever, give up!   

Thanks for reading.  Until next time.  If you liked this post and want to get more like them in your inbox, please subscribe before you leave.  Three money matters eBooks will be sent your way.  Start your financial education on me.

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Friday, November 17, 2017

13 Ways to Save On Health Care If You're Without Insurance

About 50 million people paid a penalty this past tax season for not enrolling in "Obamacare," as the Affordable Care Act (ACA) is often called.  For tax year 2017, the penalty was 2.5% of your total household adjusted gross income, or $695 per adult and $347.50 per child.  The max penalty was $2,085, so a family (2 adults) with three children or more wasn't placed into a deeper financial hole thankfully.  The tax amounts are expected to increase for 2018 unless all of the ACA is repealed.

Image result for no health insurance

For the sake of many Americans, I sincerely hope the ACA, if repealed completely, is replaced with something that works to affordably cover the majority of Americans not currently on an employee health plan.  The stakes are high then for Republicans, but it's nothing in comparison to what the common man without insurance, paying the tax penalty because it's the most affordable option, has to do to get the health care they need.  

According to the CDC, today 40% of US adults have high deductible health plans.  This basically puts them in the under-insured category because oftentimes they forego getting medical attention in order to avoid paying that high deductible.  What's worse, when they're on the verge of death and finally decide they can no longer let their condition go unaided by a health professional, these people make the emergency room their last resort.  I've had one friend almost die of pneumonia and another almost die from an abscessed tooth all because they didn't have insurance and didn't seek medical/dental help.  BlueCrossBlueShield puts the average cost of an emergency room visit at $1,233.  Moral of this story, get help before your health deteriorates to the point of needing emergency care!

Image result for high deductible

Today I have some help for the non and under-insured.  I've researched the net and have compiled 13 ways to save on health care.  Let's get it started!

1.  Part-timer with no benefits?  Your employer may provide free flu-shots, blood pressure tests, or other preventative screenings.  Take advantage!

2.  Go to your local health clinic and pay for a visit an amount commensurate with your income.  Find a local clinic at Haelthcare.gov.

3.  Try Livingsocial or Groupon.  These two sites often work with businesses looking to grow their clientele.  So they'll post money saving coupons for chiropractic care, medical massages, and teeth cleanings and X-rays.

4.  Go to training schools.  Clinics near teaching hospitals or offices where dental and chiropractic students learn often will offer steep discounts (sometimes free!) to drop in patients.  Don't worry, procedures are overseen by trained staff and instructors.  Go to Studentrunfreeclinics.org and contact them to find a clinic near you.

5.  Visit an urgent care center.  At an urgent care center, you can get treated for allergic reactions, injuries that are non-life threatening like cuts and burns, run a blood test, or even take X-rays all for a fraction of the their usual costs.  A visit can be as little as $120.

6.  Go retail!  Some supermarkets, drugstores, and big retailers like Walmart have "retail clinics" where you can get treated for common illnesses.  Costs are as low as $55 to $75.

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7.  Generic is just as good.  Name brand medications cost 85% more than their generic counterparts.  Still, be sure to shop around for the best price for your generic meds.  Needymeds.org, a non-profit, is a great resource for people looking for ways to pay for their medications.

8.  Apply for Medicaid.    

9.  If you're denied Medicaid, see if your county has a medical assistance program and apply.

10.  Go straight to a Direct Primary Care Provider.  DPCPs are great because they don't discriminate on the basis of having a pre-existing condition.  You pay a low monthly fee in exchange for unlimited visits with primary care doctors.

11.  Think you got an STD?  Go to Plannedparenthood.org for a cheap screening and practice safe sex from now on!

12.  Be a guinea pig.  Sorry...I should say: Participate in a research study.  Call the National Institute of Health at 1-800-411-1222 or the National Cancer Institute at 1-888-624-1937 to see if you qualify to be part of a study.  Cancer sucks.

13.  Go south of the border.  The U.S. shares a long stretch of land with good ol' Mexico.  Everything is so much cheaper there.  Just go to your nearest border city, cross, and get what you need.  Do your research before crossing.  Many established clinics, dental offices, and pharmacies in Mexico have great bilingual websites.     


It's a damn shame that in one of the richest countries in the world people have to seriously struggle financially to get the healthcare they need.  It is what it is, I guess, so the next best option is to look for ways to make our pains go away more affordably.  These 13 tips should be of some help.  Finally, remember that even if you look like a fitness model, you should still be making at least an annual visit to the doctor.  Many ailments don't have symptoms.  Get routine care so you discover problems early on!

Thanks for reading!  Until next time.

Wednesday, November 15, 2017

How Much Of Your Paycheck Should You Spend On The Holidays?

The Holidays are right around the corner.  We got Thanksgiving in less than two weeks, and Christmas in less than two months.  It has never been a better time to be a Jehovah Witness.  They don't celebrate crap!  And in the process they save a ton of money all year long.  It's also great if you're Jewish because Hanukkah apparently really isn't the most important holiday of the year for my Jewish peeps, and there's no need to go Christmas shopping of course.  So the rest of us (and I apologize if I left out your religion) are stuck once again figuring out just how much we should be spending, outside our normal monthly budget, on these traditional times.

Image result for Thanksgiving and Christmas

The holidays are perhaps when staying disciplined financially is the hardest.  The "holiday spirit" sets in and people start to feel warm and wonderful all over.  So it's a super emotional (not logical) time of the year.  Shopping, also an incredibly emotional experience, is like the match that lights the gasoline.  We allow ourselves to get carried away online or at the mall because our brains are chock-full of endorphins, our bodies are on never ending sugar highs (think Pumpkin Spice Lattes, Hot Chocolate, Pies, Ice Cream, etc.), and our soul is full of love.  Essentially "giving," which usually isn't free, trumps "saving."

How bad does saving get neglected during the holidays?  Would you believe the majority of Americans will spend at least one paycheck on Thanksgiving and Christmas?  GoBankingRates survey of 2000 adults (cited in the linked article) across the U.S. is eye opening.  More than half of respondents, some 57% said they will shell out at least one entire paycheck on the combined expenses for turkey day and Xmas.  The average pay for Americans who get paid every two weeks is $1,908 by the way.  Folks that's a lot of money for just two fancy meals and presents for the kids.  If that's not the straw that broke the camel's back then the next finding is.  The remaining survey respondents, nearly 44%, said they plan on spending more than one paycheck for these two days of the year!


How Much of Your Paycheck Should You Spend on the Holidays?

I did a Google search and scoured the first page for some answers and this is what I found:

1) No more than 1.5% of the annual family gross income on Xmas presents, decorations, trees, etc. (Source, Sapling.com) should be spent.  If the total gross income between you and your partner is $100K, then 1.5% would be about $1,500.  However they point to a 2011 Deloitte Development survey that many people spend less than 1.5%.  For the couple earning $100K, the average on Xmas was $800.  For households making less than $100K, the average on Xmas was $300.  With inflation, we're talking easily over $900 and $400, respectively, for the two groups noted.

2) An even simpler formula is shared at The Clear Point Blog.  They recommend you spend 1.5% of your net income on the holidays.  Currently, the average household income in the U.S. is a little over $59K.  So, 1.5% of this amount would represent a holiday expense budget of $885.  We're back at $1,500 for those households making $100K.

Spending 1.5% of your annual income on the holidays is a good rule of thumb.  So if we go back to the top where one paycheck represents on average $1,908 (or $49,630 in annual wages), and do some easy math, $1,908/$49,630 is 3.84%.  Clearly the average American is overspending on the holidays no matter how you slice it.  Is going over this 1.5% recommendation okay?  It depends.

I'd say if your debt to income ratio is low, meaning you have little debt, high income, or both, go ahead and spend that entire 2-week paycheck on the holidays.  In case you didn't know, to calculate your debt to income ratio, divide all of your current monthly debt payments (mortgage, auto and student loans, etc.) by your monthly income.  If your debt to income ratio is high, don't you dare spend an entire paycheck on the holidays!  You can't afford it, plain and simple.

Still confused how to figure out how much you should spend?

Clearpoint.org has an excellent "Holiday Budget Planner" that factors in your personal income to determine an appropriate budget.  When using $100K as a household's gross annual income, the HBP breaks down the budget as,

Gifts, $450, 30%
Parties, $150, 10%
Travel, $600, 40%
Food, $225, 15%
Donations, $75, 5%

How to Stay on Budget?

To stick to your budget you're going to have to be very self-disciplined, self-controlled, and creative.  Since gift giving and travel are the two likeliest categories where you'll overspend, I suggest you review your past practices and brainstorm new ones.  For example, do you have to travel somewhere this year?  Can loved ones come to your place for Thanksgiving?  If not, can you drive instead of fly your whole family to your destination?

When it comes to gift giving, go back and see how much you spent on people last year.  Try the following:

1) Trim your gift giving list.  Just tell your cousins and close friends you have to cutback this year because funds are tight.  They'll understand.

2)  Do a Secret Santa gift exchange with extended family.  Pick names and shop just for one person.  I do this with my siblings.

3)  Make gifts yourself.  If you knit, or are a great artist, photographer, etc., consider making meaningful gifts for others.

4) Give a certificate of a professional service you perform.  For example, if you're a massage therapist, give a loved one a free massage at your place of work.

5)  Consider re-gifting.  I get Starbucks cards at work almost every year.  I give those away as gifts to other people, and save myself both time and money.

Be smart about the holidays this year.  I can assure you that you will feel just as good about yourself if you truly focus on maximizing the experience of being with family during the holidays, and not worry so much about how much you spent on other people, food, and parties.  Thanks for reading!

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Monday, November 13, 2017

Would You Use A Sugar Daddy Or Momma To Pay for College?

College debt is so darn terrifying to some young people that they have turned to "Sugaring" to pay for their expenses.  I learned of the term just today while watching a video on MSN Money and reading the accompanying article.  We all know some young people get into relationships with older rich men or women for the money, as opposed to love.  While I knew this was how some college students pay for their expenses at school, I had no idea it was this prevalent.  Some 2.5 million users of Seekingarrangement.com identified themselves as students.  That's a substantial number.  There are more Sugar Babies no doubt who are Sugaring offline.   Let's say the true number is closer to 3 million Sugar Babies that are getting through college with the help of a Sugar Daddy or Mommy.

Image result for Sugar Babies

According to Studentloanhero.com, the average Class of 2016 graduate has $37,172 in student loan debt, up 6% from the previous year.  This doesn't include the cost of obtaining a graduate degree.  The temptation to pay for college creatively without shooting the rest of your financial life to pieces with never ending monthly payments is therefore extremely high.  Back in my day, attractive girls turned to stripping to pay for college.  The strategy or some other form of it, being an atmosphere model, e.g., is still around today, but not nearly as lucrative as is Sugaring.  The young lady in the article (Christina) at MSN Money, happens to be a Sugar Baby, cocktail waitress, AND an atmosphere model.  And she's making bank!  Up to $2K to $4K per month according to the video.  All while working on her MBA!  Dang...now that's being productive with your time.

Image result for Sugar Babies

Question: So is the money you get from a Sugar Daddy or Mommy considered earned income?  A gift?  What?  LOL!

On a serious note, both young men and women are finding it easier to establish Sugaring relationships because of a platform like Seekingarrangement.com.  And at the other end, wealthy older men and women, some who are married, are finding it easier to access sexual or emotional excitement by paying for the company (or intimacy) of younger adults.  Just because the Internet has facilitated a woman's ability to become a Sugar Baby (most SB are women), it doesn't mean it's an easy job.  Below are some pros and cons of being a female SB.  

Pros of being a female SB (We'll stick with the gender most involved)

1) You make a whole lot more money than from a regular part-time job.
2) You can say "no" to a date, trip, sex, whenever you want, meaning, you "work" when you want to.
3) Other potential benefits such as gaining mentorship or feedback on your future from conversations with older rich men.
Image result for Sugar Babies

Cons of being a SB

1) Negative Stigma.  Only your close friends or other SB will not see you as a "gold-digger."  If you're secure with your femininity (and have plenty of positive self-esteem) this should not be a problem.
2)  Can't tell your parents.  Well, I take that back.  There are some parents who when you tell them you're a SB will simply say, "Be careful."  Most parents will probably say, "Are you out of your freakin' mind?!"
3)  Safety.  Whether you think you're in control or not, never underestimate the power relationship involved in Sugaring.  Men can become clingy, and even possessive.  They will proposition you for sex even if you state clearly all you want is a platonic relationship.  That's just how the XY rolls ladies.
4)  You will not be able to have a healthy, trusting relationship with a man your age while you are Sugaring.  I don't care what type of dude your man says he is, he'll be jealous.  It will eat him up inside to know his lady is out with an older, rich man, even if you say no sex is going on.
5)  Decreased interest in dating for yourself while Sugaring.  Dating (older rich men) has become your job!  Why would you want to do it on your spare time? You'll be emotionally spent.
6)  Feeling fake.  Having to put on the uniform (make-up all the time, being clean, smelling nice always, and dressing the part) will make you feel like you're living a double life.
7)  Getting a mouthful all the time from feminist women.

As a guy, I'm all for attractive girls using their smarts (and looks) to get a Sugar Daddy.  Men have their own societal privileges and they don't hesitate to use them.  So why shouldn't women?  Would I want my daughter doing this?  Heck to the No with a capital N!  I guess I'm trying to say that if a young woman wants to enter into an arrangement with an older rich man, it's their prerogative.  They should however be ready to deal with any and all of the potential negative consequences.

So now comes the big question:

I've done somewhat of a decent job, I think, of informing you all about this.  Knowing what you now know, how would you respond to the above question?  If you don't mind sharing, drop a comment below.  Thanks for reading!  Until next time.

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Saturday, November 11, 2017

You Only Need These Two Types Of Credit Cards For All Your Credit Needs

How many credit cards should someone own?  That's the topic of today's post.  I happen to own just two, but I erred in that the two fall within the standard, run-of-the-mill types of credit cards, high credit limits and no annual fees.  I've owned a Chase Visa Freedom card ($10,800 credit limit) since 1999!  I've also owned an Amex Everyday Card ($28,200 credit limit) since 2003.  Once in a while I'll participate in the occasional promotional cashback rewards program my Chase card mails me about.  You know, where they tell you to buy at certain retailers and you'll earn 3-5% cashback on all purchases.  I'm not an active credit card user, but I probably would be if I had opened up two specific types of credit cards.

Image result for cashback credit cards

First, being an active credit card user doesn't mean you have a spending problem.  Or for that matter that you're seriously crippled by your debt.  On the contrary, one can use a credit card responsibly, paying off every last expense at the end of the month and never having to pay any interest for card balances.  Why would someone have their credit card be their go-to way of paying for everyday things?  Why not just use your ATM debit card linked directly to your checking account?  Because of the perks credit cards offer!  Duh...you knew this already.

If you're currently in the market for a credit card, I suggest you consider getting or having two, and be done with it.  But which two types of credit cards should you possess?  The answer:

1) One that focuses on cashback rewards, AND
2) One that specializes in travel rewards.

Image result for cashback credit card points

Let's breakdown how to shop for each of the two main types of credit cards starting with the cashback reward variety.

Cashback Reward Cards

When shopping for a credit card that offers cashback rewards, the criteria you must use to weed out the good ones from the bad ones include:

1.  Lowest "Purchase APR."  The Purchase APR is the interest rate you'll pay on any outstanding credit card balance.  Purchase APR are based on your credit worthiness, but the range (of what you may pay in APR) given to you by a credit card company is comparable.  Do not be swayed by 0% promotional APR's.  When the promotional time expires, you're stuck paying the Purchase APR.

2.  No annual fee.  Unless you're wealthy and want to be part of some rich club, getting a credit card with an annual fee is stupid.  Eliminate any credit card with annual fees from consideration.

3.  Foreign Transaction fees.  You shouldn't have to pay for using your credit card to make purchases out of the country or from vendors abroad.  We want zero FT fees!

4.  0% Intro APR on Balance Transfers for as long as possible.  If one credit card gives you a 0% Intro APR on balance transfers for 12 months and another for 14 months with all else being equal (see 1 to 3 above) then go with the one with the extra two months.  Hey, you never know if you'll need to transfer debt from a credit card with a higher Purchase APR to one with a lower one.

5.  The most introductory perks.  Credit card companies are very creative when it comes to getting you to open up an account.  In the case of cashback reward cards, you'll want,

a) 1st year cashback match by the credit card company, meaning you earn 2X the cashback dollar amount for your first year,

b) 5% cashback rewards on category purchases with at least a $1,500 quarterly max; if you find a credit card that will let you earn more than $1500 in cash per quarter, great!

c) 1% cashback on all purchases not in a promotional category with no limit how much you can earn,

d) Cash rewards that are redeemable whenever and in any quantity,

e) Direct deposit of the cash you earn into your bank account or to use to pay off your card account.

f) Favorable conversion ratios.  Your points add up to dollar amounts, but when redeeming them, you need to pay attention to how many points will get you a particular gift card.  You may be able to get the same gift card for fewer points at a different store.

g) $1 in cashback = $1 at checkout.  It's that simple.  Anything less is junk.

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Travel Reward Cards

To begin on the right foot with a travel reward card you must abide by criteria 1, 2 (most will only do a promotional $0 intro annual fee for the first year then charge an annual fee after that; get the one with the lowest annual fee!), and 3 from above.  If you can find a travel reward card that offers 0% Intro APR on balance transfers for a given time period, you're in luck.  Most won't do this type of promo, but will advertise $0 in fees at least for any balance transfer.  Other criteria to rate a card include:

The best introductory perks and offers.  For example:

a) The highest one-time bonus point offer when spending a certain amount within the first 1-3 months.  Don't screw this up!  If a card offers you 50,000 points (say a $500 value) for $3K in purchases within the first three months, then spend the $3K in 3 months!  Just pay off the balance each month.

b) Unlimited 2X the miles on every purchase, i.e., $1 spent = 2 reward miles.

c) Fly any airline and stay at any hotel ANY TIME.  Restrictions suck! Don't get a card with airline or hotel restrictions.

d) No Blackout dates.  Your card should let you travel whenever the heck you want.  If not, close the account and get one that does.

e)  No expiration of your miles ever!  So long as you maintain the account open, you should never have to worry about your miles expiring.

Alright my peeps, I've given you a breakdown of how to shop for the two types of credit cards you'll ever need.  When I opened my two credit cards way back when, I only cared that they had low Purchase APRs and no annual fees.  There is so much more value to a credit card these days.  They can be like savings vehicles if you opened an account with the right company, and if you pay off all your debt at the end of the month.  Happy credit card shopping!

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Thursday, November 9, 2017

10 Ways To Get The Most Out Of Your 401(k)

If Americans totally "got" the 401(k), there wouldn't be a need for financial companies who specialize in fixing them for people.  Did you know that as of June 30, 2017, 401(k) plans in the U.S. held an estimated $5.1 trillion in assets.  That's a big number!  It happens to represent 19% of the 26.6 trillion in U.S. retirement assets.  Here's another number for ya, in 2015, approximately 54 million American workers were active 401(k) participants.  I suspect the numbers will continue to grow and with that even more people will be really clueless about their retirement vehicle.

401(k) Plan Assets
Billions of dollars, end-of-period, selected periods

See Investment Company Institute, “The US Retirement Market, Second Quarter 2017” (June 2017).
Sources: Investment Company Institute, Federal Reserve Board, and Department of Labor  

Young people who have gotten their first big break in life and have procured employment with a 401(k) offering company are at risk for mishandling the first few years of their retirement savings.  They get busy learning the ropes at work and hardly pay attention to what's going on at the back end of their monthly salary disbursement.  They make the excuse of needing to wait until things "get settled" at work to finally give their 401(k) the attention it deserves.  Mistake number one.  So this post is all about how to squeeze the most juice out of your 401(k).  Let's get it started!

1.  Traditional or Roth 401(k)?  

If your employer gives you the option of either one, choose the Roth version if you're young (Millennial and Gen Z).  This is because you'll probably be at a lower tax bracket and paying your taxes upfront won't hurt as much.  Workers at higher tax brackets should select the traditional 401(k) option, making pre-tax contributions and defer paying income tax on your savings until retirement when your tax bracket may be lower.

2.  Take full advantage of the 401(k) match program, if any.

According to a 2017 survey by 401(k) provider Betterment for Business, 23% of Americans aren't taking full advantage to pad their retirement savings via the company match.  A company that matches will contribute up to a certain amount of whatever you decide to put in to your 401(k) each month, effectively doubling your monthly retirement savings.  So if you elect not to contribute to your 401(k), or contribute very little, because perhaps you want to apply as much money as you can to your student loans or credit card debt, you are leaving money on the table.  Just stupid.  Never pass up the full company match!

3.  Don't touch your 401(k) until retirement!

While it's okay to rollover your 401(k) if you happen to switch jobs  or want it held by a different custodian, it's absolutely not okay to take out any portion of it for most reasons.  What's a good reason?  An emergency you can't cover and must or face a dire consequence like becoming homeless.  You should've had an emergency fund!  When you take out any portion or all of your 401(k) for any reason, you'll incur a 10% early withdrawal penalty.  You'll also break the cycle of allowing your retirement money to grow over time via compounding.  Just leave it alone!

4.  Watch for fees.

You are paying 12b-1 fees and you probably don't even know it.  These come with ownership of mutual funds in your 401(k) portfolio.  So do front-end or back-end loads (more fees) on the funds you pick for your account.  Basically you either didn't take the time to read the prospectus or summary of the mutual funds you were allowed to select from by your employer and their custodian partner (Fidelity e.g.) OR you didn't care, not realizing how much fees eat into your savings over time.  You won't be able to go without paying some fees, bu at minimum you should understand how much they are and above all else, investigate all the options you have in your 401(k) plan so you can minimize fees!

5)  Check for allocation overlap.

One of the easiest mistakes to make by 401(k) participants is an allocation overlap.  That's because everyone is freakin' nuts about diversifying.  Not knowing anything about equities, people mistakenly pick funds containing stocks in similar industries or sectors.  Or they'll be heavily weighted toward value stocks versus growth, and vice versa.  There's a great tool at Morningstar.com called Instant X-ray that you can use to expose your overlapping funds.  Once you spot the problem, fix it!

Morningstar's Instant X-Ray Tool

6.  Default contribution level saving.

Your employer is going to set you up with a default savings rate of 2-3% if you do nothing.  That's nowhere near enough.  Vanguard Center for Retirement Research recommends you save between 9-12% if you make $50K or less.  Remember that this is a combined savings rate between you and your employer.  Think, 4.5% (YOU) + 4.5% (Employer) = 9% (Total) so you don't feel like your money is all going to retirement leaving you with very little for expenses.  If you make between $50K and $100K, Vanguard recommends you step up to a savings rate between 12 and 15%.

7.  Take the free advice!

Your employer is required to offer you an opportunity to get free yearly financial advice.  You don't have to follow the advice given to you obviously, but you should at least meet with the financial representative paid to be there for you.  Schedule your appointment!

8.  Choosing the safest investments, i.e., avoiding risk

Just because you can select "safe" investments like money market funds, certificates of deposit, or other guaranteed saving options (fixed rate annuities, e.g.), doesn't mean you should.  These choices traditionally don't keep up with inflation so in the grand scheme of things, you're actually losing money.  To determine what percentage of your holdings should be in stocks, you can take your age and subtract it from 110.  For example, I'm 41, so I should be holding 69% in stocks and the rest 31% in fixed income securities such as bonds, money market funds, etc.

9.  Rebalance as necessary.

Setting and forgetting your 401(k) is not a strategy for maximizing your investment returns.  When you have a good year, the risk-on portion of your portfolio, i.e., your mutual fund holdings, may have grown exponentially.  This has caused your portfolio to be weighted more to the risk end.  Rebalancing then would include selling shares of your mutual funds (and buying more bonds, e.g.) until you're back on your target allocation.  In the example below, you can see that the target allocation for each asset class is 25%.  However, after a great run (20% return), Asset Class 1 is now weighted at 28.57%, above the 25% target.  $300,000/1,050,000 = .2857 X 100 = 28.57.  That extra 3.57% must be shaved off by selling or trading about $37,500 worth of Asset Class 1.  In case you don't get where that amount came from, it's .0357 x 1,050,000 = $37,485.

Image result for rebalancing example

10.   Abandoning a 401(k).

Okay so you figure that since you left your job you can simply leave the 401(k) you had with your former employer's custodian and move on.  It'll be there when you need it, right?  Wrong!  Yes, you are entitled to collect from any retirement fund or account you may have lying around when you retire, but you'll have seriously hurt any chance you had at earning the best possible returns from them.  Investment choices come and go and if one of yours should be removed by your employer, it'll be switched for you most likely to a low-interest earning cash account.  Plus, abandoning your 401(k) means you won't have any vigilance on things like rising fees or changes in allocations.  Take your 401(k) with you!

Alright, I've given you 10 tips on getting the most out of your 401(k).  Main point here is that if you don't mind your money, no one else will mind taking it from you.  The mutual fund industry is happy to get your money (fees), the stock market doesn't care that you were over-allocated equities and weren't there to rebalance, and inflation is out to get anyone who isn't ahead of it.  So get with it, man!

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Tuesday, November 7, 2017

5 Financial Decisions That Matter More Than Buying A House

Purchasing a home is a symbol of middle class success.  If you're over 30-years-old and married, and you tell someone you rent, you may get some interesting reactions.  A look of concern for you is the most common reaction you'll get from the person you're talking with.  They may then ask you, "How much are you paying in rent?"  You answer them and this begets the next question: "Why not put all that rent money on a home of your own?"  To avoid a financial debate, you might say, "We're working on it."  I'm pretty sure many of you who rent (because you're not interested in buying a home) are tired of being perceived as financially foolish or worse, sub-middle class, for not being a homeowner.  Today you get some vindication.

Image result for buying a home

For starters, the Republican Tax plan, if passed, will take away for most people the biggest benefit of owning a home, a deduction on mortgage interest.  You'd have to owe more than $500K on a home to be allowed to deduct.  I've written on this blog that people are fooled (by the RE industry) into thinking that the benefit of mortgage interest deduction is substantial, when it really isn't.  Only homeowners with bran spankin' new whopper mortgages reap the benefit of the current tax code.

Beyond this, there are so many reasons why owning a home is a bad investment.  Check out: The True Cost of Owning a Home.  Your first home should be an investment property that you rent and collect monthly cash flow on.  But let's not get into this today.  Instead, let me tell you what I think are 5 financial decisions that are way more important than buying a home.

1.  Going to college.  Huge, huge, decision.  Way more important than deciding to finance a new home.  Some college majors will literally cost you as much as a home mortgage in some parts of the U.S.  Whereas you can walk away from a home, as many people with upside down mortgages did during the Great Recession, only acts of government can reduce or eliminate your school loans.

Yes, not paying on your mortgage ruins your credit, but the bank takes back the property and you're off the hook from having to make any future home payments once you're foreclosed on.  These days going to college is only worth it if, A) You can find an affordable way of doing it, B) You have a clear plan for success as a student, C) You can calculate how you'll handle student loans after graduation, and D) You know exactly what kind of work you can get with your degree.

Image result for cost of going to college

2.  Getting Married.  In many unfortunate cases, marriage makes once highly successful people the total opposite.  The person they married is not a compatible financial or inspirational match.  The sex, boring.  The day-to-day living, blah.  If your partner doesn't inspire you to continue growing as a person, or to stay ambitious, then you've married wrong!  Let me put it like this...when you go to the gym and workout, would you rather have a partner that is just there going through the motions with you, or someone who pushes you to get that extra rep in because he/she knows you have it in you?  Exactly, I rest my case.

But let's not forget how costly weddings are.  According to Costofwedding.com, the average cost of a wedding in 2017 is $26,720!  So, a stifling marriage reduces your potential to earn a lot more in income or from investments for every year you stay with your spouse PLUS what you paid initially to get married (this amount could've been put to work as an investment earning compound interest) and you're looking at thousands of dollars going up in flames.  Buying a house is so not as important on deciding WHO and IF you should get married.

3.  Getting a divorce.  This is the worst of all financial decisions to be made.  Perhaps if you got a prenup getting a divorce won't be as financially bad for you.  There's not a lot of reliable data on the number of Americans who get prenups.  People without assets, usually young people, have no need for a prenup unless they want to spell out who's on the hook for school loan payments (liabilities) if their marriage should end.  If you marry later in life, a prenup should be a point of discussion between you and your partner.  Otherwise...

You'll be cursing the day you ever got married.  I've been divorced once before and I was sooooo lucky that my ex-wife was very amicable about our parting ways.  No children together made it even easier to divide things like cars, furniture, and who kept the home (it was me!).  Yesterday I was at the gym and I overheard a convo between two African-American cats talkin' about divorces.  The younger guy was telling his older friend that he's been going to divorce court for more than 1.5 years!  He has to pay child support which is subject to revision every year.  His wife is still suing him for the house and other assets.  So yeah, divorces suck.

Solution:  Can you work it out?  Is there any way you can recover the love and respect the two of you had for each other?  If the divorce is as described in number two above, or if you're in a dangerous domestic situation with your spouse, then by all means bite the bullet and get a divorce.  But let's not fool ourselves, deciding on getting a divorce is so much more important financially than deciding to buy a home.

Image result for cost getting a divorce

4)  Having children.  Please don't procreate if you're extremely poor today.  Get out of poverty first.  See my post from Sunday for ideas on how to do this.  Would you like to know the difference between animals and humans (yes, I know we're animals too) when it comes to reproduction?  Under unfavorable environmental conditions, e.g., a lack of food or survival resources, some animals will not reproduce.  It takes a lot of calories to make a healthy baby animal!  Not us humans, we make babies even when the only thing in the fridge is a box of baking soda.

Kids are expensive!  My two children will literally eat all day.  Our grocery bill is almost $1K a month.  Maybe it is more right now with the growth spurts happening at home.  By the way, it now costs upward of $200K for a middle-income family with a child born in 2015 to raise a child through the age of 17.  And it's only going to go up, of course.  One child = $200K+, Two children = $400K+...get the picture?  So, having children is a financial decision you obviously need to prioritize over buying a starter home.

5.  Saving and investing for retirement with a "number" in mind.  You can save and invest for retirement a la stupid, meaning, simply putting in a little money here and there to a retirement account.  Or you can calculate how much you will need to live a comfortable life.  There's a retirement crisis in America partly because 81% of Americans (Merryl Lynch study) don't have the slightest clue as to how much they should have saved come retirement time.  So what can you do?  Start by estimating your living expenses in retirement.  Factor in healthcare too!

This is how I came up with my retirement number.  It's a very lofty goal but one I'm working hard to make happen.  Get busy funding your retirement and don't stop until you surpass your number.  If you don't get there, well, hey...at least you tried.  Change your retirement plans around so you can still have a sweet retirement.

Okie, dokie.  I've laid out some serious wisdom here for you today.  If you're not able to buy a home right now for financial reasons, bad credit, no down payment, whatever, consider it a blessing in disguise.  There are at least five more important financial decisions than buying a house and you should think through each one before acting.  Thanks for reading! If you liked this post and want to receive more like them in your inbox, please subscribe before you leave.  3 free eBooks included!
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